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SlATE OF CALIFORNIA

OFFICE OF TIlE INSPECTOR GEN RAL


A \[FRIC,\'i RF(OVERY ACT FU'lDS

LAURA N. CHICK
INSPECTOR Gt'NfR/\L

Transmitted via e/mail

April 20, 2010

Mr. Earl John son, Senior Policy Advisor to th e Mayor


and Interim \VIB Executive Director
City of Oakland Workforce Investment Board
One Frank Ogawa Plaza, 3rd Floor
Oakland, CA 94612

Dear \1r. Johnson:

Final Review Report-City of Oakland Workforce Investment Board

The State of California, Office of the Inspector General (IG), American Recovery and Reinvestment Act
Funds CARRA) reviewed the City of Oakland Workforce Investment Board's (WIB) ARRA funds
received for the Workforce Investment (WIA) programs. The WIB commissioned the Oakland
Private Industry Council (OPle) as the Administrator to provide the services for \VIA
Although OPIC administers the program, the \VIB is responsible for all ARRA funds are
appropriately and in accordance with applicable laws and regulations.

The WIB was awarded ARRA funds totaling $6,302,628. Of that amount, the \VIB has received
$3,141,841 for the following federal WIA programs: ARRA Summer Youth Program, ARRA Adult
Program, and the ARRA Dislocated Worker Program. As of the review date, no ARRA funds were
requested or received for the Rapid Response Program.

The IG conducted a review of ARRA funds received and expended for the period February 17,2009
through December 31,2009. review's objectives were to determine if the WIB properly accounted for
and used ARRA funds in accordance with ARRA requirements, and applicable laws, and regulations.

The WIB's management is responsible for ensuring accurate financial reporting and compliance with
applicable laws, regulations, and program requirements as as evaluating the efficiency and
effectiveness of the program. Unless identified during our review of ARRA funds, we did not assess the
efficiency or effectiveness of program operations.
Because the \tVIB acted only as the pass~through, the review was conducted at Oakland Private
Industry Council (OPle). The OPICs accounting records and supporting documents were reviewed to
determine if ARRA funds were properly accounted for and expended. Costs allocated to various OPIC
and the allocation method was reviewed for propriety and To determine
revenues and expenditures complied with applicable laws and the following
procedures were performed:

• Interviewed key personnel and reviewed applicable procedures to gain an


understanding of program-related internal controls.
• Reviewed participant files and contracts between OPIC and subcontractors.
• Reviewed revenues to determine if they were properly and supported.
• Selected a sample of expenditures reported to whether they were:
o Allowable
o Program related
o Incurred within the reporting period
o Adequately supported
o Properly recorded

Summary of Review

The federal Workforce Investment Act (\VIA) offers a comprehensive range of workforce development
activities through statewide and local organizations. Available workforce development activities
provided in local communities can benefit job seekers, laid·'off workers, youth, incumbent workers, new
entrants to the workforce, veterans, persons with disabilities, and employers. The purpose of these
activities is to promote an increase in the employment, job retention, earnings, and occupational skills by
participants.

ARR/\ funds were received by the \VIB and 100 of the funds received were passed through to
OPIC. The amount of ARRA fLlnds OPIC was $790,189 more than recorded ARRA expenses,
representing 2S percent of the 53,141,841 in ARRA funds distributed to OPIC. The \VIB and OPIC claim
that funds were used to pay for non~ARRA funded WIA program.

The review disclosed several significant issues: lack of a valid contract, an arbitrary cash draw-down
process, inadequate process for reviewing contractors' reimbursement requests, significant accounting
errors, and incorrect reporting of jobs

Review Findings

No Valid Agreement Between the WIB and OPIC

services as the Systems Administrator over ARRA funds


without a contract. The last and executed Memorandum of Understanding was for July 1,2008
through June 30, 2009. The WIB continues to reimburse the OPIC for expenses claimed (including
ARRA) despite the lack of a contract. State of California, Employment Development Department
(EDD) in their monitoring reports April 10,2008 and August 22, 2008 also identified no valid
contract as a finding. \Vithout expectations spelled out in a written contract, it opens the WIB

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and the State up to additional risk and liability, and provides no legal recourse should OPIC not meet
ARRA requirements.

OPIC's Cash Draw,Down of ARRA Funds is Arbitrary

The OPIC's cash draw down methodology is based on estimates rather than reimbursements for actual
ARRA expenditures. has resulted in significant higher draw downs than actual expenditures. For
example, as of December 28, 2009 OPIC drew down for the ARRA Adult and ARRA Dislocated
\Vorker Program. of March 5,2010, only $24,372 had been expended on either program. Other ARRA
draw downs could not be traced to actual expenditures because the expenditures recorded on the draw
down relate to both ARRA and non-ARRA \VIA expenses. In order to ensure money is spent properly,
the cash draw down should match with the expenditures from the same funding source. If this doesn't
happen, we cannot track what the money was spent for. This creates a lack of transparency with OPIC's
accounting records.

OPIC explained that the 2009-20lO non-ARRA \VIA funds to the City of Oakland and the \NIB were
delayed and not available; therefore, to continue operations they used the ARRA Although the
grant award letter and funding was released to the WIB in January 2010 by EDD, procedural issues at the
City of Oakland further delays. The Oakland City Council's approval of the funding budget
wasn't until February 16, 2010 and up-loading of the approved budget amounts into the Oakland account
system led to the delays. The non-A.RRA WIA funding was finally made available for drawn down in late
March 2010.

The U.S. Department of Labor Training and Employment Guidance Letter No. 1+08 states that in
utilizing ARRA funding, the workforce system must be gUided by the principles of transparency and
accountability, as well as timely expenditure and activity implementation. The guidance further states
that the ARRA funds are to supplement and be spent concurrently with annual WIA/vVagner, Peyser
funding and should not be used to replace funding currently dedicated to workforce development and
summer jobs. The U.S. Department of Labor Annual Funding Agreement Addendum for ARRA states
that grantees are advised that ARRA funds are intended to supplement, not supplant, existing \VIA
Title I State formula funds.
OPIC is Not Adequately Reviewing Contractors' Reimbursement Requests
OPIC is not adequately reviewing reimbursement requests submitted by its contractors to ensure all
costs are eligible and supported prior to approving and making payments. IG staff reviewed 34 percent
of claimed contractor expenditures and determined that $43,651 of $289 ,224 claimed (15 percent) were
ineligible or lacked sufficient documentation. Additionally, there were unquantifiable questioned costs
related to the contractors' allocation of rent and utilities to the ARRA program since justification for the
percentages used to allocate costs were not provided. For example, 80 percent of the \Vatkins Memorial
Church of God's rent was billed to the ARRA program for the period of June 2009.
The following examples were noted our review:
• Spanish Speaking Citizens (SSCF) was reimbursed for $2,806 on fieldtrips to the
Santa Cruz Beach Boardwalk, Waterworld USA, and \Nashington Park and food for the
participants.
• Leadership Excellence did not provide adequate supporting documents to verify that $15,368 in
staff salaries and benefits was related to the ARRA program.
• The Alameda County Youth Development did not provide adequate supporting documents for
expenditures of $4,260, including $1,205 in staff salaries and benefits and other expenditures of

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$3,055. Additionally, $1,155 of bus passes purchased not have support shoWing they were
provided to participants in the ARRA program.
• The Alameda County Health Care Foundation did not provide adequate supporting documents for
$8,297 in expenditures for salaries ($7,770) and bus passes ($527).
• The \Vatkins Memorial Church of God did not provide adequate supporting documents for $9,100
in expenditures for salaries (56,100), maintenance and repair costs ($200), and office rent ($2,800).

OPIC Overstated Jobs Created by 29

For period ended 31, 2009 OPIC reported 35.1 3 as the number of jobs created. Based on IG
staff computation, OPIC should have reported only The difference is a result of OPIC employees who
provided services on the non· ARRA \VIA Programs being included in the job calculation.

OPIC Improperly Recorded $132,294 of ARRA Costs

OPIC improperly recorded the following costs to ARRA Summer Youth Program:
• in administrative salaries was actually for non~ARRA WL\ salaries
• $7,160 in program salaries was actually for non~ARRA \VIA salaries
• $42,514 in accruals was actually non~AR~t\ Summer Youth Program
• $1,169 in accruals was actually for noncARRA Adult Program
• $41,970 in OPICs rent expense
• $1,200 ($400 per month for 3 months) in car allowance for OPICs Chief Executive Officer
• ($142 per month for 3 months) in parking allowance for the OPICs Chief Executive Officer
• $4,267 in communication
• $2,764 for accounting software
• $3,285 for memberships, conferences, and marketing cost

Also, we identified $3,517 in salaries that was miscoded to non~ARRAAdult Program when it
actually was for the ARRA Summer Youth Program.

stated in the Executive Office of the President's Office of Management and Budget (OMB), Updated
Implementing Guidance for the American Recovery and Reinvestment Act of2009 (M~09~15), "to maximize
transparency of Recovery Act spending required by Congress and the Administration, agencies must not
co~mingle Recovery Act funds with other funds." A similar finding was cited by EDD in their monitoring
report dated August 22, 2008.

Quarterly Reports Did Not Agree \\1ith OPIC's Accounting Records

The quarterly report submitted to EDD for the period ended December 31, 2009, did not agree with
OPICs accounting records. An additional $282,632 in ARRA Youth related expenses were included in
the general ledger, but excluded from the quarterly report. Accurate and timely quarterly reporting is a
term and condition of each ARRA and data submitted to EDD in each quarterly report are
compiled and submitted to Federal agencies to provide information regarding the use of funds. OPICs
reporting of inaccurate creates errors and omissions in the EDD data and therefore, could mislead
the public.

Conclusion

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To allow for transparency and accountability of ARRA funds, the \VIB should observe all federal and
state directives to ensure that: ARRA funds are separately identified and recorded; ARRA funds are
spent concurrently with annual 'vVIA/\Vagner, Peyser funding; and ARRA funds supplement, not
supplant WL,:I.,./Wagner,Peyser funding. If the \VIB plans to continue to use OPIC to administer the
program, a written agreement should be executed. Finally, we recommend that WIB more actively
oversee the expenditure of ARRA funds, OPIC, and its subcontractors.

The City of Oakland's response has been included in this report. In accordance with the Inspector
General's policy of transparency, the report will be placed on our website,

We appreciate the assistance and cooperation of the WIB and OPIC. If you have any questions regarding
this report, please contact, Linda Ellis, Supervisor, at (916) 445-0115.

elY

25 }! (;)/)
~ . C~tuhc
. /J

LAURA N. CHICK
California Inspector General
American Recovery and Reinvestment Act Funds

cc: Mr. Ray Carlisle, Chairman, City of Oakland Workforce Investment Board
Ms. Gay Plair Cobb, Chief Executive Officer, Oakland Private Industry Council, Inc.
Ms. Bouapha Toommaly, Special Assistant, Boards and Commissions, Office of the Mayor
Ms. Pam Harris, Acting Director, Employment Development Department
Mr. Gregory Riggs, Deputy Director, Policy, Accountability, and Compliance Branch,
Employment Development Department

-----~~~~- ----......- - - - - - - - - - - - -
........... -------

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Response

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Workforce Investment Board
CITY OF OAI«LAND

Reaching Business

April 8,2010

Laura Chick
California Inspector General
American Recovery anel Reinvestment Act Funds
1400 Tenth Street, Suite 100
Sacramento, CA 95814

Re: Response to the Office oftlle Inspector General American Recovery Act Funds Review of
City of Oakland Workforce Investment Board

VIA Email and Mail

Dear Ms. Chicle

1 am providing you with the City of Oakland's response to the findings from the Inspector
General's Office review of the City of Oakland Workforce Investment Board's (WIB)'s
American Recovery and Reinvestment Act (ARRA) funds received for the Workforce
Investment Act (WIA) programs. The review was for the WIA ARRA fll11cls received and
expended for February 17, 2009 to December 31, 2009. As a local workforce area, the City of
Oakland serves as the recipient of WIA funds and contracts with the Oakland Private Industry
Council COPIC) to serve as the System Administrator for the WIA programs.

First anel foremost, we take om duties to administer and monitor the use of all public funds,
especially ARRA funds, very seriously. The City and our partners have and continue to engage
in required oversight and monitoring to ensure public accountability and transparency. Indeed,.
we have been engaging in conective actions prior to the review. The review has also included
findings that are inaccurate and we are respectfully providing you \-vith the needed clarification.

It is important to note that it is our understanding from the State Employment Development
Department (EDD) that the ARRA WIA allocations were a supplement to the 2008-09 baseline
FO;'mula allocation and governed by same rules. The intent of the ARRA funds is to provide
additional resources 'vvithin the existing to respond to local needs. These directives are
outlined in the Department of Labor's Training and Employment Guidance Letter
number 14-08. The ARRA funds Calmot be adequately reviewed separately and, instead, needs to
be seen within the full context of the WIA funding streams. It is also our understanding from the
State that the use of multiple funding streams to support continuity of local services is not

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unique. There is established precedent for this in the way the State channels funds to local
workforce investment areas.

The approval of the WIB budget and allocation of the 2009-2010 WIA Formula funds to the City
of Oakland and WIB were delayed. In order to continue the administration anci operation of
critical workforcc development scrvices in a time of record unemployment rates, the WIB, Llpon
consultation 'with the State, utilized ARRA adult and dislocated worker funds for WIA
Formula participants and programs. WIA ARRA funds were the only funds available to support
both the WIA Formula and WIA ARRA expenses through December, 2009. As part of the plan
discussed with the State, the WIB anticipated readjusting the funding streams once the WIA
Fonnula I-hnds were available for use. The 2009-2010 WIA F01111ula funds to the WIB were
included in the State's Job Training Automation system in January 2010. All of the required
adjustments 10 the appropriate funding streams are occurring. OPIC completed the formal
generallec1ger adjusting entries during the 1110nths of January, February and a portion of March
20 1O. These completed actions directly address many of the findings.

review raised concerns about the WIB's oversight of the WIA funds and recommended that
the "WIB more actively oversee the expenditure of ARRA funds, OPIC, and its subcontractors."
The City of Oakland has hired additional staff to effectively meet the oversight cU1dmonitoring
requirements of WIA and ARRA f·unds.

The. review also raised the need for a written agreement to be executed between the City and
OPIC. A written agreement was in place upon the receipt of the ARRA WIA funds and expired
in June 2009. The City, the WIB and OPIC have negotiated a new agreement that also required
a public process. A nevV written agreement is now in place.

Of critical importance is that the WIB and its partners have utilized the ARl~ WIA funds 10
expeditiously and effectively provide critical workforce development programs serving low-
income residents, in keeping with the ARRA fund requirements. Some of the accomplishments,
to date, include:

• Produced over 1,000 jobs for at-risk Oakland youth and prepared these youth for future
employment tlll'ough the Mayor's youth summer programs. Many of the youth who
participateci in the programs have stayed in school and are pursuing their educational and
intellectual endeavors. Others have retained their jobs and advanced in their positions;
• Accommoclatec1more than 79,000 visits to OPIC and its affiliate One-stop Career Centers
between July 2009 and March 2010;
III Experienced significant increases in e111'ollments in Oakland's WIA-flmcled programs;
and
• Successes were highlighted in media and federal reports.

These accomplishments required that the WIB, OPIC, and service providers, in an extremely
short period of time, conduct procurements, provide all eligibility documentation of youth,
monitor contracts, engage in data analysis and MIS reporting and other reporting requirements,
and recruit, train, supervise, and provide case management to vulnerable youth.

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The City of Oakland remains very appreciative ofthe efforts of the WIE, OPIC, and comll1unity
partners in quickly pulling together vital programs to serve local workforce development needs.

The following are responses fi'0ll1 the WIE and OPIC to the specific findings.

Finding 1: No Valid Agreement between the WIB and OPIC.

Response 1: As provided above, we have executed a \vritten agreement the OPIC's


administration of WIA, including ARRA, funds and programs.

Finding 2: OI)IC's Cash Draw-Downs 01' ARM Funds is Arbitrary.

Response 2: The findings state that "OPIC's cash draw c10Wl1111Cthodology was based 011
estimates rather than reimbursement for actual ARRA expenditures". draw-downs were
not arbitrary and were based on actual expenditures incurred for both WIA ARRA and WIA
Formula activities.

The findings also state that the draw-clown methodology "has in significant higher draw
clown than the actual ARRA expenditures" and that OPIC drevv clown $980,026 for the ARRA
Adult and Dislocated Worker programs. The review was of the draw-clowns based on the ARRA
recorded expenses onl y. expenditures for the WIA Formula that were a part of the
draw-downs from the ARRA fund draws were not considered and therefore make for the
appearance of ARM fund excess draw downs versus ARRA expenses. As explained above,
the ARRA funds were the only funds available for the 2009-2010 fiscal year for both ARRA and
WIA Formula expenditures until January, 2010. The amount of $980,026 as being for ARRA
Adult and ARIZA Dislocated Worker program draw-downs were the result ofthe amounts drawn
from the ARRA funds for the WIA Formula Adult and Dislocated Worker expenditures.

This was done with the understanding that adjustments would made for WIA Formula
expenses out WIA ARRA expenses and the WIA ARIZA funds would be reimbursed for
the WIA Formula draw-downs made for those expenses. OPIC completed the formal
general ledger adjusting entries during the months of January, February and a portion of March,
2010 and the City is in the process of correcting the ARRA funel draws for the WIA Formula
fl.\l1cl program expenses so that the ARRA funds are reimbursed for the WIA Formula fund
expencii tures.

Finding 3: OPIC Not Adequately Reviewing Contractor's Reimbursement Requests

Response 3: OPIC has consistently applied established and acceptable invoice verification
procedures in processing subcontractor's invoices. The procedures followed have been
acceptable to federal, state, local and private auditors and monitors, without exception. OPIC has
not had or subject to any questioned and/or disallowed costs in the past regarding any
audits/reviews relative to the processing and payment of subcontractor invoices. While complete
desk audits ofinvoices (which include the requirement for subcontractors to send in the most
minute source documentation for each item included in an invoice and for each invoice)
required from certain subcontractors where there is a history of documentation problems.

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However, it is not the mostei:Iicient or practical method of processing subcontractor payments.
Therefore, summaries and calculations with certain documentation detail requested as deemed
or defined in the contract is used in processing the invoices. In addition to the
documentation received, OPIC often makes varioLls queries of subcontractors at the time of
invoice to clear any ambiguous matters. Also, in conjunction with administering the
ARM Program, OPIC used a worksite monitor anel program coordinator to conduct on
visits to subcontractor program operations proceeded as planned and appropriate
documentation to operations and expenses of the ARRA Summer Youth Program was
available to supp0l1 purported activities and expenses.

The foilowing are responses to the specific findings uncleI' this category.

Sub-Finding 3.n: Spanish Spcaldllg Citizens Foundation (SSCF) - Fielcltrips

The review stated that the Spanish Citizens Foundation (SSCF) was inappropriately
reimbursed for $2,806 011 to Santa Cruz Beach Boardwalk, Waterworld USA, and
Washington Park and food

Response 3.a: The fieleltrips were a part of the SSCF Summer Youth work experience training
program design and the cost is allowable under OMB Circular A122, Attachment B.53.a.which
defines the following "Training costs" as allowable:

"Costs of preparation anclmaintenance of a program of instruction including but not


limited to on-the-job, classroom, and apprenticeship training designed to increase the
vocational effectiveness of employees, including training materials ... are allowable."

The food costs are relevant to the Washington field trip and the remaining fooel costs were
for refreshments anc! staff meetings as allowed under OMB Circular A122, Attachment B.29.a
which states,

"Costs associated with the conduct of meetings and include the cost of
renting facilities, meals, speakers' fees, and the "
Urban YMCA of the East Bay was a subcontractor of bps and picnIc were part
of their proposed summer work experience program to:
1. Provide necessary training in conflict resolution and allow youth to experience these
activities in a supportive and structured social (Participants hailed from
East Oakland, an area known for its violent activity.)
2. Participants were also provided the opportunity to positive relationships
with staff in an effort to reduce feelings of mistrust authority figures. Allowing
the participants to experience his or her supervisor as a mentor and fi:iencl was an
important instructional component of the work readiness portion of program.
3. Participants were provided an opportunity to value and benefits of
working in collaboration as they participated in the various team exercises
that were woven throughout the -JlelcJtrips.

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The fooel costs incurred were for the Washington Park field trip.

SSCF provided refreshments/meals for the following events during the course oftheir program:

1. Job Fair - employers were invited to a job fair attended by all summer youth
participants. Participants spent the time visiting with prospective employers, learning
about the job opportunities.
2. Regular "check-in" meetings were helel with the participants, prior to their respective
report times at their assignecJjobs. Refreshments were served to allow youth
participants to go directly to their job assignments at the conclusion of the meetings.

Sub-Finding 3.b: Spanish Speaking Citizens Foundation (SSCF) - Work Shoes and
Clothes

The review stated that SSCF purchased work shoes and clothes in the amount of $1,774 for the
participants on the last day of the contract and it is unclear why these items were not purchased
at the beginning of the contract in order to utilize the benefit for the participants.

Response 3.b: The items in question were purchased for eight of the nine Summer Youth
participants in the SEE Green Careers cohort of SSCF summer youth experience. Past
experience revealed a trend of where participants slowly dropped out of the program after
receiving quality work shoes and other work apparel. Awarding these items was included in the
program plan and design as an incentive for completing the job training program. As such, OPIC
considers them to be allowable under OMB Circular A122, Attachment B. 53. which states:

"Costs of preparation and maintenance of a program of instruction including but not


limited to on-the-job, classroom, and apprenticeship training designed to increase the
vocational effectiveness of employees, including training material. .. , are
allowable.

Of the nine parti cipants:


1. 3 continued in advanced training programs with other organizations
2. 1 secured part-time employment
3. 4 secured full time employment
4. 1 entered Missionary Training School

Sub-Finding 3.c: Peralta Foundation

The review stated that Peralta Foundation was reimbursed for $4,216 in payroll taxes already
claimed and reimbursed in a previous reimbursement request.

Response 3.c: This was an apparent oversight in the review since the $4,216 was clearly
reduced from the total amount of one of the invoices. We are resubmitting the paid invoices
where one of which shows the amount in question was reduced (from check #004425). (Please
see enclosures)r

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Sub-Finding 3.d: Leadership Excellence

The auditor stated thai: Leadership Excellence did not provide adequate supporting documents to
verify that $15,368 in staff salaries and benefits was related to the ARRA program.

Response 3.d: As stated above, it was not the practice to conduct a desk audit in processing
subcontractor invoices. The amount referred to was for a percentage (based on time devoted to
ARRA Summer Activities) of employee's wages paid and did not include any fringe benefits.
During the processing of the invoice we reviewed the subcontractor's payroll journals and
checked the calculations of the position amounts. In addition, we verified via the site monitor
and program coordinator that the time claimed by the subcontractor's staff appeared to be
reasonable in view ofthe operation of the program. Based on our various queries during the
invoice processing we were assured by the contractor that the percentages of time claimed were
supportable. We have since requested and received the individual time sheets to support the
amounts claimed.

Sub-Findings 3.e: Alameda County Youth Development (ACYD)-(OPIC Subcontractor);


Alameda County Health Care Foundation (affiliate of ACYD); and 'Watkins Memorial
Church of God (affiliate of ACYD)

Response to findings for above ACYD and Affiliates 3.c: OPIC has consistently applied
established and acceptable verification procedures in processing subcontractor invoices. The
documentation submitted by the subcontractor and om discussions at the of invoice
processing with the subcontractor ane! our program coordinator provided sufficient information
to justify the reimbursement.

We have obtained additional responses anel documents from ACYD and its affiliates to further
document the amounts questioned, We are forwarding those responses and documentation with
this response. (Please see enclosures) ~

Finding 4: Shared Expenses Charged Solely to ARRA Programs.

Response 4: The $53,912 amount listed ,;;,'e1'e all Formula, and not shared, fund expenses. All
listed amOlmts were part of the aelj ustments made to remove the WIA Form ula fund expenses
£i'0111 the ARlZA fund as explained above to reimburse the ARRA fund for draw-downs made for
Formula fund expenses, OPIe completed the formal general ledger adjustments out of the ARRA
fund during months ofJanllmy, February and a portion of March 2010. Tl1e ARRA funds me
being reallocated accordingly.

Finding 5: OPIC Overstated Jobs Created by 29.

Response 5: This finding relates to the ARRA 1512 Data Report the quarter October-
December 31,2009. The ARRA 1512 Data Report requests that n um bel' of jobs funded by
ARM be expressed as "full time equivalents" (FTE) and relates to jobs created und/or
retuined thl'OLlgh the use of those funds.

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As explained to the reviewers, allocation of 2009-2010 WIA Formula funds to the City was
delayed and the funds \vere not included in the .ITA system until January 2010. The ARRA funds
were the only funds available and were to support 29 FTE positions retained during the
period October - December 2009. The FTE jobs reported and referred to by the auditor as
being overstated were jobs retained ancI funded by ARRA. Those jobs would not have been
sustained during quarter without the use oflhose ARRA funds.

Finding 6: OPIC Improperly Recorded $78,382 of ARllA Costs.

Response 6: The $78,382 for Formula expenses were charged to the ARIZA fund. As explained
above, the ARIZA funds were the only funds available to support Oakland's entire workforce
investment system until January 10 when the Formula allocations became available in
State's .rTA system.

OPIC completed the formal general ledger acljustments for the $78,382 of Formula expenses out
of the ARRA fund expenses in January, February and a portion of March 2010. Funds used for
ARIZA funds will be reimbursed ancl the amounts drawn-down from the Formula funds.

Finding 7: Unallowable Costs were Charged to ARRA.

Response 7: The $4,545 costs questioned were not advertisements as claimed; rather they
were outreach ancl recruitment to local employers as well as to youth to ensure performance
objectives for the upcoming summer. These are allowable costs uncler OMB Circular A122,
Attachment B.1.d.(2) which defines the following costs as allowable:

"Costs of communicating with the public and press pertaining to specific activities or
accomplishments vvhich result from performance of sponsored awru-ds (these costs are
consiclereclllecessary as part ofthe outreach effort the sponsored awards)"

explained to reviewers, the "Stimulus Express" was an of summer publication for the
ARRA Summer Youth Program to highlight the work and accomplishments of youth participants
and the organizations that served them specifically success in providing academic
learning, work readiness training and work experience placements to 1042 youth over the course
of the summer. The served as outreach to employers about the benefits providing
. work experience, internships, and job opportunities to low income Oakland youth. This function
is critical to future WIA / ARRA summer employment efforts (i.e., in 2010) as well as to our
year-round goal of maximizing the employment of youth our community. Oakland has a
record high "official" unemployment rate for adults (in excess of 17%) and an estimated 50% for
minority youth. As a result of this pUblication, we have hac! employer inquiries about employing
youth during the upcoming summer (2010.) 2. The publication also served as an outreach and
recruitment vehicle to low-income youth to encourage parlicipation summer "earning anel
learning" programs, going forward (as Oakland reserved some of its ARI<A funding for Summer
_0.)

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Finding 8: Quarterly Reports Did Not Agree with OPIC's Accounting Records.

Response 8: OPIC inadverLently omitted some expenses accrued from June 30,2009 in the
cumulative expenses reported the quarter ended December, 2009 the AItRA Youth. The
actual amount ofthose expenses totaled $240,453. The amount stated review included
$1,169 for an adjustment that was made that reduced the $282,632 amount and did not consider
$41,010 of accrued Summer Youth participant wages and statutory benefits as of June 30, 2009
that were included in the Report. We aclmovvleclge the inadvertent omission of the $240,453
fi'om the cumulative amount as of December 2010 and will ensure that it is included in the
March, 2010 quarterly report cumulative amount.

In conclusion, we greatly appreciate the opportunity to utilize ARRA f1.1l1c1s for services critical
to our local workforce development during this time of economic upheaval. We remain
committee! to providing effective oversight, monitoring, accountability, and transparency of all
public funcls, especially ARRA funds.

Please do not hesitate to contacime should you have any questions.

yours,

S1Ji~
Em'l Johnson
Interim WIB Executive Director
City of Oakland Workforce Investment Board

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Review of Response

State of California, Office of the Inspector General (IG) of the American Recovery and Reinvestment
Act (ARRA) funds issued a draft review report to the of Oakland Workforce Investment Board
(WIB) on March 26,2010. \Ve received the WIB's to that report on April 8, 2010.

No Valid Agreement Between the WIB and OPIC

The \NIB's response indicates that a valid was in place with OPIC, but expired in June 2009.
response was silent regarding the lack a contract from July 1, 2009 through June 30, 2010. In
addition, the WIB indicates that the WIE has subsequently executed a written agreement specific to
OPIC's administration over ARRA funds. Documentation provided by the WIE for the contract period of
July 1, 2009 through June 30, 2010 was eventually and executed on April 9, 2010.

OPIC's Cash Draw~Downs ofARRA Funds is Arbitrary

The response emphasizes that ARRA cannot be separately reviewed and needs to be seen within
the full context of the WIA funding streams. \VIE further maintains that ARRA funds were used to
support \VIA formula funds until January 2010. However, ARRA specific federal guidance, contract
language, and state directives explicitly require that ARRA funds and expenditures are separately
recorded, that ARRA funds are to supplement and be spent concurrently with annual WIA/Wagner~
Peyser funding, and that ARRA funds should not be used to replace funding currently dedicated to
workforce development and summer jobs.

OPICis Not AdequatelyReviewing Contractor's Reimbursement Requests

The WIE indicates that the items questioned in the report are allowable costs. We maintain that the
Spanish Speaking Citizens Foundation's (SSCF) $2,806 expenditure for the fieldtrips and food are
unallowable under OMB Circular Cost Principles for Non~profit Organizations Attachment B
(14) Entertainment Costs. This section specifically states that costs of entertainment, including
amusement, diversion, and social activities and any costs directly associated with such costs (such as
tickets to shows or sports events, lodging, rentals, transportation, and gratuities) are unallowable.
Additionally, OMB A~122 A General Principles states that to be allowable under an
award, costs must be reasonable for performance of the award and that the cost is of a type generally
recognized as ordinary and for the performance of the award.

Based on further review of our preliminary finding, it appears that the $4,216 in payroll taxes for the
Peralta Foundation were claimed in two invoices; however, OPIC reimbursed the costs in only one
invoice. As a result, we have removed this amount from the questioned costs.

Furthermore, our review was to determine whether OPIC was adequately reviewing reimbursement
requests and paying only allowable and supported costs; therefore, we did not to OPIC's contractors
to review their records, but relied upon OPIC to provide the documentation to complete our
review. Based on the documentation provided by OPIC, we determined that OPIC does not require their
contractors to submit adequate supporting documentation prior to approving and making payments. As
stated in their response, OPIC has subsequently obtained and provided to the additional
documentation from contractors; however, as our finding states, the additional supporting
documentation should have been obtained and reviewed for propriety prior to payment.

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By establishing a policy and a process that OPIC adequately reviews expenditures and requires sufficient
and adequate supporting documentation for requests for payment, OPIC and the WIB will ensure that
accountability over ARRA funds are maintained.

Shared Expenses Charged Solely to ARRA Programs

The WIB's response to this finding indicated that the entire $53,912 in expenses that we had identified as
shared expenses were improperly recorded to the ARRA summer youth program. Based on our review of
the \VIB's response, we included this finding in OPIC Improperly Recorded $132,294 ofARRA Costs
finding.

OPIC OverstatedJobs Created by 29

Pursuant to OMB M,1O,08, Section 5.9, a job paid for with ARRA funds, but ultimately funded by non,
ARRA funds, should not be counted in the jobs calculation. These 29 jobs were initially funded with
ARRA, as a loan for non~ARRA \VIA Programs. intent is that these will be hours ultimately not
funded with ARRA funds.

OPIC Improperly Recorded $132,294 ofARRA Costs

The WIB's response lacks the understanding and acknowledgement that non~ARR,A. expenditures must
not be used to draw,down ARRA funds. ARRA specific federal guidance, contract language, and state
directives explicitly require that ARRA funds and expenditures are separately recorded, that ARRA
funds are to supplement and be spent concurrently with annual WIA/\Nagner,Peyser funding, and that
ARRA funds should not be used to replace funding cunently dedicated to workforce development and
summer jobs.

Although the 'VIB's response indicates that ledger adjustments were completed subsequent to
OPIC receiving funding for non,ARRA programs, corrective action should include insuring that ARRA
funds are supplementing and not supplanting other funding streams. The effect of OPIC's general ledger
adjustment resulted in accounting errors, lack of transparency, and additional staff time.

Unallowable Costs were Charged to ARRA

Based on our review of the 'VIB's response ONtB 122 Appendix B (1) (d) Public Relations, we have
removed this from our report.

Quarterly Reports Did Not Agree with OPIC's Accounting Records

The 'NIB's response acknowledges that their quarterly reports contain omissions and indicates that they
will implement corrective action in the March 2010 quarterly report.

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